There's a growing concern in the cryptocurrency space, with echoes of the 1990s tech bubble. But here's the good news, a crash isn't inevitable. The key? Avoiding "soap bubble coins." These are the ones that gleam with high valuations, limited circulation, and no real product behind them. They boast short lockup periods for founders' tokens, opaque pricing models, and the potential for venture capitalists to dump them on unsuspecting retail investors. These projects are designed to exploit our altcoin enthusiasm, especially for those newer to the crypto world. They bombard us with technical jargon like "modularity," "ordinals," and "zero knowledge rollups" to create a sense of mystery and allure.
Breaking Ba... Wise
But crypto investors are evolving. We're no longer chasing empty promises. We crave tangible results. We want projects like Chainlink, Helium, Livepeer, Swarm Markets, and Dimo, real-world products that are already generating revenue. This is the true potential of Web3, a decentralized infrastructure accessible to everyone, where users can become part-owners of the services they rely on.
Share Your Internet, Earn Crypto
Liquidity Squeeze
Low token circulation can be a double-edged sword. While it might initially drive prices up due to scarcity (like diamonds), it also creates a liquidity squeeze. Imagine a project with only 1 million tokens. A few thousand sell orders can trigger a dramatic price drop because there aren't enough buyers to absorb the selling pressure. This makes it difficult to enter or exit positions quickly, potentially leaving investors stuck during price swings. High valuations often ignite a speculative frenzy. News headlines scream about astronomical price predictions, and social media fuels the excitement. This can create a disconnect between a token's price and its actual usefulness.
Invest Smarter, Not Harder
A 2022 Messari report highlighted a disturbing trend concerning inflated valuations for projects with minimal development. This disconnect raises red flags about long-term sustainability. However, there is a way to properly navigate these low float, high valuatation projects. Not all of them are inherently bad. But why? Crypto is hard enough. Trying to recreate Pythagoras Theorem while riding a unicycle on a tightrope over a volcano, just to see if the project is a good investment is more than we should have to do. There are plenty of established projects with near-complete token circulation and proven revenue models. Why gamble on unproven ventures (Aethir, AltLayer, Ethena, IOnet, LayerZero, Saga, StarkNet, Wormhole, zkSync, etc.) when solid alternatives exist?
